When SAP and Microsoft announced the plans to move more of SAP load to Microsoft Azure in Spring of 2016 (here is the news analysis blog post), it was clear this was a partnership that was bound and needed to happen. Customer overlap, technology partnership and ecosystem synergies all made this partnership nothing in the massive surprise category… But in the meantime, the partnership has been quiet – apart from some joint plans for SAP SuccessFactors. So, it’s good to see some new traction and plan in the partnership, unveiled on November 27th. 

So, let’s dissect the press release in our customary way – it can be found here:

REDMOND, Wash., and WALLDORF, Germany — Nov. 27, 2017 — Microsoft Corp. and SAP SE on Monday announced integrated offerings to provide enterprise customers with a clear road map to confidently drive more business innovation in the cloud. In a bold show of commitment, the two companies also announced they will be deploying each other’s cloud solutions internally. Through their unique partnership, the companies will co-engineer, go to market together with premier solutions and provide joint support services to ensure the best cloud experience for customers.

MyPOV – No surprise – Microsoft and SAP will drink their own champagne and use each other products / services… the emphasis on clear roadmap maybe some self-reflection on the fact that there has not been too much roadmap traction in the past 18 months. Good to see co-created and supported offerings and services – that’s what prospects and customers expect from both vendors when they partner.

SAP HANA® Enterprise Cloud — SAP’s private managed cloud service — on Microsoft Azure will allow customers to run SAP S/4HANA in a secure, managed cloud. Additionally, Microsoft will deploy SAP S/4HANA® on Azure to help run its own internal finance processes, and SAP will move its key internal business critical systems to Azure. Finally, SAP Ariba is currently utilizing Azure and is exploring further use within its procurement applications. Together, SAP and Microsoft will help companies make the most of running SAP applications in the cloud.

MyPOV – Great paragraph summing up the scope of the announcement. SAP HANA Enterprise Cloud (HEC) gets a new home option on Azure (next to SAP, that will keep offering the service), SAP Ariba is considering expanding its use of Azure (hoping for details). And of course, both are using each other – Microsoft is upgrading its SAP systems to S/4HANA on the finance side, SAP will run its internal systems on Azure. Should be good CAPEX savings for SAP, and good load / utilization of Azure, meaning a better return on capital for the Microsoft investments into Azure (assuming the load will move from SAP based HEC to Azure based HEC).

SAP CEO Bill McDermott (left) and Satya Nadella, CEO at Microsoft, double down on their commitment to partnership

“As technology transforms every business and every industry, organizations are looking for the right platforms and trusted partners to help accelerate their digital transformation,” said Satya Nadella, CEO of Microsoft. “Building on our longtime partnership, Microsoft and SAP are harnessing each other’s products to not only power our own organizations, but to empower our enterprise customers to run their most mission-critical applications and workloads with SAP S/4HANA on Azure.”

MyPOV – Good quote by Nadella, describing the scope of the partnership announcements.

Enterprise companies are increasingly moving business-critical systems to the cloud for the benefits digital transformation provides: better customer relationships, more empowered employees, streamlined operations, new business models, and new products and services. […] As leaders in enterprise software, SAP and Microsoft are aligning closely to provide customers with the safe and trusted path to digital transformation.

MyPOV – This paragraph looks like it was bolted into the press release later, just to mention digital transformation. It’s not clear how moving the underpinning of HEC from SAP infrastructure to Azure enables digital transformation. Both vendor could / should have mentioned this.

“We are taking our partnership to the next level with this new capability to run SAP S/4HANA in the Microsoft Azure environment,” said SAP CEO Bill McDermott. “The world’s significant businesses trust Microsoft and SAP. Together, we will help companies win the customer-driven growth revolution.”

MyPOV – Good quote by McDermott – but introduces another benefit / goal for enterprises – customer driven (aka organic) growth. Another message next to digital transformation.

SAP and Microsoft both will run SAP S/4HANA on Azure for their internal operations. Microsoft is transforming its internal systems — which include legacy SAP finance applications — and will implement the SAP S/4HANA Finance solution running on Azure. Microsoft also plans to connect SAP S/4HANA to Azure AI and analytics services for more efficient financial reporting and more powerful decision-making. SAP is migrating more than a dozen business-critical systems to Azure for the optimal efficiencies, flexibility and innovation the platform offers. This includes the SAP S/4HANA software supporting Concur, an SAP company.

MyPOV – Good to see more details on the mutual plans to use each other services, products and platforms. It was time or Microsoft to upgrade its SAP systems, and given the partnership with SAP – where else than Azure would Microsoft run them? Interesting that the press release shares that Microsoft is using Azura AI and analytics services for better reporting and decision making… The SAP answer would be using the SAP Digital Board Room – but that product is not mentioned here. And Microsoft has to use its own AI of course. Too bad SAP doesn’t share what it is moving to Azure… let’s not hope these are email, Lync and other services. Kudos for sharing that the (also Seattle based) Concur serving S4/HANA system, will move to Azure. So, SAP is running multiple S/4HANA instances… certainly a good pilot.

Both companies will document the internal projects to provide customers with guidance and enterprise architecture for deployment of SAP applications on Azure.

MyPOV – Good to see – can’t wait to learn more on the progress and details.

With SAP HANA Enterprise Cloud on Azure, customers get the best of both worlds: application management and product expertise from SAP and a global, trusted and intelligent cloud from Microsoft Azure, including the range of Microsoft cloud services.

MyPOV – Good summary – but surprises that data residency / privacy aspects have not been mentioned. As well as which Azure locations will start with the HEC offering, and then roll out – a key aspect for customers making decisions to use HEC on Azure.

Enterprise customers of all types, such as The Coca-Cola Company, Columbia Sportswear Company, Coats and Costco Wholesale Corp., count on SAP and Azure today for their businesses.

“The strategic partnership announced between Microsoft and SAP is an extremely important development for the Coca-Cola System,” said Barry Simpson, senior vice president and chief information officer at The Coca-Cola Company. “The value of aligned engineering, sales and delivery between these two strategic partners will allow our system to accelerate our digital agenda. This is a very positive and exciting development for us.”

“SAP and Microsoft are key partners with Costco, and this alliance will help drive our cloud strategy and digital business forward,” said Jim Rutherford, senior vice president of Information Systems at Costco Wholesale.

“Microsoft and SAP are strategic partners helping us grow our wholesale and direct-to-consumer businesses. Their close alignment is an integral part of advancing our technical architecture and cloud strategy to better serve our customers around the world,” said Mike Hirt, vice president and chief information officer at Columbia Sportswear Company. “We produce innovative products that allow our customers to pursue and enjoy their outdoor passions. Our partnership with Microsoft and SAP is essential to us continuing to deliver on that commitment.”

“With SAP HANA on Azure, we have the data intelligence to operate more efficiently across all aspects of our business and accelerate the delivery of finished goods to our customers,” said Hizmy Hassen, chief digital and technology officer, Coats. “The Microsoft and SAP alliance provides us with the assurance we need for our innovation in the cloud.”

MyPOV – Nothing is better than customer proof points for a partnership – and Microsoft and SAP can bring some big ones to the table. Few cloud partnerships can muster Coca-Cola Company, Costco, Columbia Sportswear Company and Coats for a launch press release (and these may only have been the ones starting with a ‘C’ in case anyone noticed).


Overall MyPOV

A partnership that was about to happen, the question is really what took both parties so long… one can speculate that hopes for the cloud version of S/4HANA staled these plans for a bit, but just speculation. There is little that Azure wasn’t ready to run HEC in fall of 2016 than compared to today… and surely customers are happy to see SAP and Microsoft ‘drinking their own champagne’ – but no need to wait before those internal processes were agreed on.

For customers the partnership is a win… as SAP can spend less CAPEX (over time) into HEC as load moves to Azure… and hopefully put this back into more R&D (e.g. for S/4HANA) – and a better return on capital for Microsoft as Azure gets more utilization. If all goes well it means customers will have to pay less for running S/4HANA, while it is being operated by a vendor who does (amongst other things) infrastructure management (IaaS) for a living, compared to SAP (who is certainly in the SaaS and PaaS – but less and less (if at all) in the IaaS space).

On the concern side this partnership needs to pick up steam, show customer traction, value and customer success… both vendors know how to do this – now they have to deliver. Stay tuned.


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